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CIPFA has issued its first guidelines on the role of chief finance officer in 21 years, in the face of reorganisati...
CIPFA has issued its first guidelines on the role of chief finance officer in 21 years, in the face of reorganisation and compulsory competitive tendering.

The statement, approved by CIPFA's council, addresses the changes the post of chief finance officer has undergone since the last local government reorganisation in 1974, examining trends such as privatisation and devolution of financial controls.

It is also intended to steer finance officers away from pitfalls similar to the swaps debacle, which showed councils had exceeded their legal powers. Central to the chief officer's role is s151 of the Local Government Act 1972, which says one officer in English and Welsh councils must be responsible 'for the proper administration of their financial affairs'. Similar rules apply in Scotland.

CIPFA says 'the chief finance officer must be seen to be at the centre of the council's decision making process' to meet its statutory responsibilities. Devolving financial advice 'would diminish the opportunity for those responsibilities to be performed adequately', it says.

The statement points out the dangers of privatisation, implicitly criticising Berkshire CC for handing virtually all the finance service over to one contractor. It argues 'contracting out all financial services to a single firm . . exposes the local authority to some degree of additional risk with potentially serious consequences in the event of a default.

'Few alternative firms may be able to immediately replicate the services and an authority seeking such replication may find itself exposed in a seller's market'. It warns of the dangers of a contractor being taken over, harming performance or the contractor's financial security.

Chief finance officers should not normally be involved in a bid for a management buy out, because 'there is a potential conflict of interest. A replacement chief finance officer with s151 responsibility would be required', the CIPFA guidelines say. When councils are drawing up a financial services contract they should ensure there are strict terms for performance, indemnity insurance, possible conflicts of interest and the rights of the council if the contractor is taken over or is no longer able to provide the service. CIPFA advises councils not to include internal audit in a contract alongside other finance functions, contrary to Berkshire's arrangements.

David Thomas, head of CIPFA's local government division, said the institute had no objection to privatisation of finance services but was anxious to ensure councils had enough safeguards.

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